Investor Relations| P & F Industries Reports Third Quarter and Nine Months 2000 Results
Harriet Fried/Klea Theoharis
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P & F Industries Reports Third Quarter and Nine Months 2000 Results
Revenues Up 7.3% For the Quarter and 10.9% For the Year
Revenues for the third quarter of 2000 increased 7.3% to $21.8 million, from $20.4 million for the third quarter of 1999. Net income for the quarter totaled $960,000, or diluted earnings per share of $0.26, compared to $1.2 million, or diluted earnings per share of $0.33, for the comparable period of 1999.
For the nine months ended September 30, 2000, revenues increased 10.9% to $61.6 million, from $55.6 million for the comparable period of 1999. Net income for the period was $3.0 million, or diluted earnings per share of $0.83, compared to $2.9 million, or diluted earnings per share of $0.79, for the comparable period of 1999.
Florida Pneumatic's sales in the third quarter increased by 15.5% to $12.5 million, due primarily to the addition of a new account obtained in the fourth quarter of 1999. Gross margins decreased to 31.9% from 40.4% as a result of two factors: First, the strengthening of both the Japanese Yen and the New Taiwan Dollar raised the cost of imported items, which comprise a large portion of Florida Pneumatic's product mix. Second, the Company no longer benefited from the economies of scale experienced in the third quarter of 1999, when production reached extraordinary levels in preparation for a major new customer launch. The decrease in gross margins was partially offset by a more profitable product mix. Green Manufacturing's sales in the third quarter were essentially flat at $5.0 million versus the same period in 1999, while gross margins increased to 15.9% from 11.5% as a result of increased labor productivity. Further, Green recently reduced employee turnover by restructuring wage scales to be more competitive in the Ohio labor market and we anticipate that this will further improve labor productivity.
Embassy Industries' sales of heating products in the third quarter were virtually unchanged at $2.9 million. Gross margin from heating equipment increased from 34.1% to 35.4%, due primarily to the weakening of the Euro, which lowered the cost of imported products. Sales at Embassy's Franklin division decreased 11.9% to $1.4 million due to the loss of two significant customers, one of which exited the business, and a decrease in orders from a third major customer. Gross margin from hardware sales increased to 26.9% from 23.9%, due to the elimination of initial order discounts offered last year to a significant customer opening new stores.
Richard Horowitz, Chairman of the Board, President and CEO of P&F Industries, stated, "While there was softness in demand in many of our product categories during the third quarter of 2000, we are encouraged by meaningful profit improvements at Green. In addition, we are excited that Embassy will begin selling a new line of small residential boilers in the fourth quarter of 2000 with the goal of establishing this as a major product line over the next few years. The boilers are especially complementary to our radiant heating product line and will be targeted initially to our current plumbing and heating wholesale customers."
Mr. Horowitz continued, "We do not expect the fourth quarter of 2000 to meet last year's record results. Sales are anticipated to be down 23%-28% from last year's record fourth quarter primarily as the result of a 33%-38% decrease in Florida Pneumatic's sales compared to the fourth quarter of 1999. The decrease at Florida Pneumatic is due primarily to the fact that in the fourth quarter of 1999 a significant amount of shipments for a large new account were for one-time inventory stocking requirements that will not be repeated in 2000. Sales at Green are expected to be down 15%-20% in comparison to the fourth quarter of 1999 due primarily to Green's second largest account effectively shutting down production for the fourth quarter due to excess inventory. Sales will also decrease because of a slowdown in orders from customers in the wrecker and refuse markets. Sales at Embassy's heating division are expected to be up 2%-5% from 1999's fourth quarter due to several new accounts obtained earlier in the year. And lastly, Franklin's fourth quarter sales are expected to be flat in relation to last year's fourth quarter."
"We also anticipate that gross profits will be negatively impacted primarily by the decreases in revenues at Florida Pneumatic and Green. Fourth quarter gross margins at Florida Pneumatic will be approximately 34%-36% compared to 33% for the fourth quarter of 1999. The decrease in sales at Green will have a dramatic impact on gross margins due to the large amount of fixed factory overhead carried. Gross margins are expected to be 5%-9% for the fourth quarter of 2000 compared to 17% for the fourth quarter of 1999. Gross margins at the heating and hardware divisions of Embassy should be consistent with the third quarter of 2000."
"Selling, general and administrative expenses will be comparable to the third quarter of 2000, but will increase as a percentage of revenue due to the decrease in sales. We expect a very modest decrease in interest expense as we pay down our revolving credit facility in the fourth quarter. As a result of all of the above, we expect P&F's fourth quarter net income to be 55%-65% lower than the comparable period of 1999."
P&F Industries has scheduled a conference call on Thursday, November 9th at 10:00 a.m. Eastern Time to discuss its third quarter 2000 results. Investors and interested parties may listen to the call by dialing 212-271-4801 or via a live Web cast accessible at www.vcall.com. To listen, please register and download audio software at the site at least 15 minutes prior to the call. The Web cast will be available on the site for 30 days while a telephone replay of the call is available for two days beginning at 12:00 p.m. Eastern Time, November 9, 2000, at 1-800-633-8284, reservation # 16870055.
P & F Industries, Inc., through its three wholly owned subsidiaries, Florida Pneumatic Manufacturing Corporation, Green Manufacturing, Inc. and Embassy Industries, Inc., manufactures and/or imports air-powered tools, hydraulic cylinders, baseboard and radiant heating products. The Company also imports various security hardware items and compressor air filters, markets a line of pipe-cutting and threading tools and makes heavy-duty pipe wrenches. P&F's products are sold under their own trademarks, as well as under the private labels of major manufacturers and retailers.
This is a "Safe-Harbor" Statement under the Private Securities Litigation Reform Act of 1995. Any forward-looking statements contained herein, including those related to the Company's performance for the year 2000, are based upon the Company's historical performance and on current plans, estimates and expectations. They are subject to various risks and uncertainties, including, but not limited to, the impact of competition, product demand and pricing. These risks could cause the Company's actual results for the 2000 fiscal year and beyond to differ materially from those expressed in any forward-looking statement made by or on behalf of the Company. Forward-looking statements speak only as of the date on which they are made, and the Company undertakes no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise. CONSOLIDATED BALANCE SHEETS & SUMMARY OF EARNINGS (PDF)
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